Most culinary schools today are still teaching their students how to compute the wrong food cost. Granted the math is right, but the dollars involved are hurting the bottom line of our restaurants. The problem arises from the separation of percentage points and dollars.
Banks Use Dollars, not Percentages Points
One thing I am quite sure of is that banks do not accept percentage points as deposits, believe me I've tried! For some reason the teller just looked at me dumbfounded then just started chuckling. Matter of fact she had so much fun with it she showed the caller next to her who responded in much the same manor. I did not find the humor in it since I had bills to pay, product to buy, and employees wanting their cash too. To rectify the situation I cowed to the pressure and made out a revised deposit slip using their required dollar standard.
So if you can not deposit percentage points why do most restaurants use this as their key focus goal? Should not the establishments focus on dollars instead? Your darn right they should.
A Higher Food Cost Does not Mean Theft or Waste
It's the end of your period and the accountant just brought in the p & l. A quick scan shows your food cost is 35%. What! The first thought that runs through most operators and managers minds is we have a theft or product waste problem . Well, that may be true, but before you go running to the staff and start ranting and raging you have to find out if that is the truth. You may very well have to eat those words after you get through this article. Matter of fact they may need to be prepared instead.
What Is Ideal Food Cost Then?
Well let's take a look at what the real food cost value is and how it is divided. To compute real food cost you take the cost of the product you needed to produce the food and divide it by the sales revenue of that food. You can compute the food cost for an individual plate, or over a specific period of time. For example if it costs you $ 3.50 for the product and you sell the item for $ 12.00 your food cost is $ 3.50 / $ 12.00 = 0.2916 or 29.16%
29% Food Cost, That's Great
Yes, 29% food cost is not bad, but is it the best thing for the restaurant? Let's take a look at sample full service restaurant. Looking at a few of their menu selections we have a chicken dish which is on the menu for $ 15.00, steak for $ 19.00 and a steak and lobster dish for $ 28.00. When we look at the cost side the chicken is $ 4.00, the steak $ 7.00 and the steak and lobster $ 12.00. We do our food costs on these to come up with the chicken dish running a 27%, the steak 37% and the steak and lobster a 43% food cost.
It's pretty clear, if you want to run below that magical 30% food cost number, ell chicken! But, as I said when we started the bank does not like percentage on the deposit slips, so convert them to dollars. Okay, since they sold a chicken dish for $ 15.00 and it cost them $ 4.00 that's easy, $ 15.00 – $ 4.00 = $ 11.00. Are they happy now? They have their 27% food cost, and banked $ 11.00. All great until someone tells them of their error. Sure they ran a nice food cost, but they could have banked more money. How? By selling either of the other dishes. The steak, which cost them $ 7.00 to produce and sold for $ 19.00 would have banked them $ 12.00 and the steak and lobster would have bought in a whopping $ 16.00.
If it were me going to the bank to make the deposit I would much rather be depositing $ 16.00 for the steak and lobster versa the $ 11.00 for the chicken and would take the associated 43% food cost with a smile. So, next time your actual food cost numbers come in run your ideal food cost numbers to compare before you fly off the handle with your staff. The difference between your real and actual food costs is where any associated problems can be found with respect to theft or product waste issues.